what happens to debt when people die?

Question

What if your parents have a large amount of debt and they pass away? Do the children pick up the tab?

Answer 1

The debt is passed to the deceased person's estate. So if Uncle Boris dies owing Visa $10,000, and leaves a bank balance of $10,000, and a will that says you get the $10,000, it goes directly from his estate to Visa...

Answer 2

No. Relatives are not responsible for deceased relatives debts. If there is an estate, the estate may be responsible for paying the debts. So in a way that debt could be reducing your inheritance. You would have to look into that further. Most creditors just write off the account when some dies. Great question.

Answer 3

During the process of settling the estate after someone dies, all debts are paid using the assets of the deceased (bank accounts, stocks, house, cars, furniture, etc.). If that's not enough to pay it all, then some of the creditors just don't get paid and have to write off the debt as uncollectible. The children are not responsible unless they have co-signed the loan / credit card. If there's not enough to pay off everything, you won't inherit anything because there won't be anything left to inherit, but that's better than inheriting debt!

Answer 4

Unless there is an insurance policy covering their death then the debt is passed onto their estate. The children do not pick up the tab. Make sure there is sufficient insurance coverage.

Answer 5

The estate gets liquidated.

All debts get paid.

If there is money left then you might inherit some.

If there's more debt than money, the excess debt "disappears" (get written off as uncollectable because you can't collect from a corpse)

Answer 6

The parents' estate owes the debts...that is, the debts have to be paid from whatever they leave before the children inheret the estate.

Answer 7

Good question, don't put it past SallieMae to dog you till you die, make you wish you were dead and to be at the gate before you, waiting for your last months payment.